Have you been thinking about what’s next…

During peak holiday season we find that a little bit of down time (whether you’re sitting on a beach or on the sofa at home) often allows business owners to take a breath and start to think about what’s next …

For most founders, the business has been the constant, the thing that demanded your time, shaped your weeks, and defined a significant part of who you are. The people around you have grown up inside it. Your customers know you. Your suppliers trust you. In many ways, the business is you.

But now you’ve started to ask a different question. Not what comes next for the business, but what comes next for you.  That shift in thinking is significant. It’s the beginning of an exit strategy.

The right exit route depends on your priorities, your business, your people, and what kind of legacy you want to leave behind.

One choice you may not have considered is the Employee Ownership Trust (EOT).  This is a relatively recently established but growing exit route, and one worth understanding.

In simple terms, an EOT allows you to sell a controlling stake in your business (over 50%) to a trust established for the benefit of your employees. The trust acquires the shares on behalf of the workforce, funded by a mix of cash on the balance sheet and the future profits of the business itself.

Founders who use this exit route receive relief from capital gains tax (CGT) at 50% on their sale proceeds, making an EOT one of the most tax-efficient exit structures available to UK business owners.

There are some key questions worth asking yourself as you consider your exit route:

What does financial security look like for you, what value would you need to receive? 

What role do you want to play in the transition? – Do you want a clean break, or are you happy to stay on in the business guiding its future (what can you commit to? what do you genuinely want?).

What matters to you about what happens next? – when you look at the business five years from now what do you want to see? An independent successful business? A thriving culture rooted in the community it has served, that you helped create and build?

What is your timeline? – Exit planning is a process, not an event.  Moving to employee ownership can be that next step.

Who are you doing this for? – The most successful exits we see are those where the founder has a clear sense of purpose beyond the transaction.

These are high level questions every company owner has before they embark on considering if an EOT transition is a path for them. The answers will be different for every seller and there are no right or wrong answers. This is an important stage in the life of your business, and you need to work with a specialist team that understands you and your motivation for considering a sale to an EOT.

Here at RM2 (one of the Employee Ownership Association’s Specialist Advisors), our team specialises in advising owners on the process of a sale to an EOT. We will guide you through every aspect of the transaction and handle compliance issues afterwards.  We will also help you look to the future with tailored incentive schemes to keep the next generation of managers and employee owners rewarded and motivated.

All great projects start with a first step – we want to get to know you, your business and what you are looking to achieve so that we can provide you with the right level of guidance.

We never assume knowledge, and we’ve advised on over 150 EOT transactions (as well as going through the process ourselves!), so we know the pinch points, and questions raised by owners, management and employees.  So, take that first step and drop us a line at enquiries@rm2.co.uk and we can have a conversation on whether an EOT would suit you and your business.